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  • leveraging Digital Platform Ecosystem Evolution:Examining Micro-Strategies in JD XTL Case

    Yiling Fanga,*, Guangjin Li Business School, Sichuan University, Eastern Frist Ring Rd, Chengdu, China

    a email: funnyyl@163.com *corresponding author

    Keywords: Digital platform ecosystems evolution, Platform strategies, Digital capabilities, Ecosystem structure

    Abstract. Digital platform ecosystem (DPE) have revolutionized digital economic era by enabling new forms of collaboration, needs to develop to ensure long-term sustainability. However, little attention has been paid to a comprehensive understanding of how core firm leveraging and managing digital platform ecosystem evolution. To address this knowledge gap, we conducted a case study of JD XTL, one of the china’s largest online e-commerce ordering portal to examine DPE evolution process .Our findings show that, JD has leveraged digital platform ecosystem evolution that links closely with micro-strategies actions: (1) Key platform strategies, (2) digital capabilities, (3) ecosystem structure. Our process model capture management strategies which practitioners can choose from when addressing various challenges.

    1. Introduction Digital platform ecosystems (DPE), which function as complex socio-technical systems that

    facilitate interactions between various actors through developing digital architecture and governance [1]. Some of today’s most successful companies such as Airbnb, Google and Facebook are at the centre of digital platform ecosystems. For example, Facebook, which started as one-sided platform (enabling the interactions between private users), has formed a robust ecosystem of actors around its platform (users, advertisers and third-party developers).

    Despite their significant economic importance across various industries, successful digital platform ecosystems remain difficult to build and sustain over time [2, 3]. Internal and External triggers such as Competitor behaviour, regulatory uncertainty and technology change may prompt digital platform ecosystem to evolve. Therefore, operating in environment characterized by uncertainty and unpredictability, digital platform ecosystems need to evolve constantly in order to ensure their long-term survival [1, 4, 5]. The evolution of DPE is seldom a self-driving and self- sustained process; instead, it requires deliberate and timely management to deal with unexpected obstacles and opportunities [6, 7].

    However, the majority of studies adopts the evolution of digital platform ecosystem from macro perspective, few investigate how enterprises manage and leverage the evolutionary process. There is lack of in-depth studies, which analyse how platform owner changes strategy to drive the evolution of digital platform ecosystem over time. Early relevant literature mainly focus on pricing structure [8], ignoring other factors such as lifecycle model and logic strategy [9]. Furthermore, to ensure the survival of the ecosystem, platform owners also need to develop digital functionalities to attaining IT-enabled enterprise agility. While researchers have started to investigate the evolution of digital platform ecosystems [5, 10], there is a lack of research analysing how platform owners can leverage the evolution of their ecosystems. Specifically, we formulate the following questions:

    How do core firm leveraging the digital platform ecosystem evolution from micro strategies perspective?

    Using a case study of JD’s XTL, one of the china’s largest online e-commerce B2B2C ordering portal in Retail industry, this study aims at offering a process ecosystem model, which captures the JD digital platform ecosystem evolution. Our argument proceeds as follows. First, we summarize

    2019 International Conference on Strategic Management (ICSM 2019)

    Copyright © (2019) Francis Academic Press, UK DOI: 10.25236/icsm.2019.021229

    mailto:funnyyl@163.com

  • existing literature on business ecosystem, platform strategies in evolving ecosystem and Digital capabilities. Secondly, we present the theoretical framework building on the strategy-structure interplay to guide our analysis. Subsequently, we introduce single longitudinal case study and present the findings which constructing a process model of DPBE evolution.

    2. Literature review

    2.1. Business ecosystem Business ecosystem literature that deals with relationships between a focal firm and its

    environment from a co-evolutionary perspective [11], emerged as a response to the growing need for a new paradigm for strategizing, competing in the networked economy [12] and has its intellectual roots in theories organizational ecology. The term “business ecosystem” was first introduced in the mid-1990s and subsequently has become pervasive in strategic management. This theory renews traditional competitive advantage and resource-based view, provides professional view on co-evolution and co-creation [14, 15].The development and subsequent leveraged of a business ecosystem by a core firm can bring a number of important benefits for the focal organization. The process of ecosystem development is determined by two primary factors: The organizational strategies of the core firm and the role it plays within the ecosystem [11-13].

    2.1.1. Core firm strategies Classical strategic theory emerged from the background of the big industrial era, cultivating the

    core competence of enterprises through resource acquisition to gain competitive advantage. This paper intends to draw on the strategic management ideas of Lengnick-Hall and Wolff (1999), combined with mainstream basic theory to classify strategic logic to guide the strategic direction of enterprises at different stages (see Table1) [16].

    Table 1: Three Core Logics of Contemporary Strategic Management Capability logic Guerrilla logic Complexity logic

    Representative Research Streams

    The Resource-Based View (Barney, 1991);Core competition(Prahalad and

    Hamel, 1990)

    Hyper competition (D’Aveni 1994);Dynamic Capabilities(Teece

    et al. 1997)

    Chaos Theory (Stacey 1995) Business Ecosystems (Iansiti and

    Levien 2004) Core

    Principles Postulates that superior performance is the result of leveraging firm specific

    strategic resources and capabilities

    Posits that superior performance is the result of rapid and relentless innovation that disrupts

    existing business paradigms to keep competitors off-balance

    Superior performance is a result of maintaining the health of the business

    ecosystem, which leads to productivity, synergies from diversity and durability

    of the benefits derived. Key

    Prescriptions Identify and exploit firm specific

    strategic resources that are valuable, rare, inimiTable

    Leverage complementary resources that enhance the value creating potential of

    strategic resources

    Develop dynamic capabilities that allow an organization to rapidly recombine existing

    assets and competencies to form Value propositions.

    Adopt aggressive measures to cause fundamental instability and create a unique and

    unconventional basis for competing

    Understand and manipulate the underlying forces and attractors that

    create order in the business ecosystem Develop ecosystem capabilities (as

    opposed to self-serving, internal organizational capabilities) through direct intervention or providing the means for capability development

    across the network

    2.1.2. Ecosystem role Ecosystem actors are one of the key elements in a business ecosystem in order to realize the

    value proposition [15]. The most significant actor of ecosystem is labelled the keystone, which is a vital species in the case of business ecosystems. The keystone also referred to as focal firm [13] or platform owner [9] or ecosystem leader, plays the role of regulating the overall function of the ecosystem.

    Iansiti (2004) explores the roles and strategies of core companies in the ecosystem. By taking on the role of the cornerstone, the core firm influences the development of the ecosystem with three different mechanisms [12]. First, keystone companies can connect different node networks to increase ecosystem productivity. Second, the keystone enterprises can promote the robustness of the

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  • ecosystem by introducing innovation flows. Third, keystone companies can leverage their centrality in the network to encourage diversity within ecosystems and extract value from ecosystems.

    2.2. Platform strategies in evolving ecosystem A new trend in strategic development is the construction of a business ecosystem based on

    platforms [17]. Rothe et al. (2018) defined platform ecosystems as organizations that (a) offer a scalable and modular technological architecture, (b) create value by managing and governing independent ecosystem partners, and (c) the existence of network effects between these ecosystem partners and the platform’s customers [18]. As a complex social-technical ecosystem, the platform- based ecosystem also has the unexpectedly evolutionary trajectory which remains elusive topic in early literature [19]. Although researchers have recognized the architecture of platform is evolvable and the number of ecosystem actors also grows over time and have co-evolution activities [2, 7], there is a lack of systematic approach towards evolutionary ecosystem processes, which mainly focuses on life cycle and growth perspective [1].

    2.2.1. Platform leader strategies Platform enterprises have established a new order